This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, click the "Reprints" link at the top of any article.

In 2010 Kelly launched a branded program, “Absolute Zero,” to underscore its commitment to worker safety, and this message is regularly communicated to its 1,500 branches across the U.S. and to the roughly 550,000 people it employs worldwide.

With responsibility for hundreds of thousands of workers, attention to containing Workers’ Comp costs is a paramount concern at the highest levels of the company, says Gary Pearce, vice president of Kelly’s risk management group. The size of Kelly’s Workers’ Comp reserve, he notes, “is a very large number relative to our earnings. It’s a high-visibility issue for us.”

To get a sense of how critical Workers’ Comp cost containment is for a staffing company like Kelly, winner of NU’s annual Excellence in Workers’ Comp Risk Management awards, consider the fact that last year, the company issued more than 342,000 W-2s in the U.S. alone.

“That exposure base is usually the one that makes people gasp,” says Mike Tilley, vice president of Workers’ Compensation. Whether it’s a full-time or part-time employee, he notes, “for the amount of time they spend on a job site, you’re exposed.”

Given that momentous exposure, Kelly can afford to leave nothing to chance in its efforts to prevent, manage and settle claims.

Holding its 1,500 branch and staffing sites throughout the country accountable for their own Workers’ Comp experience has been the key to keeping those costs in check.

Because field managers have a financial stake in their offices’ success, “it behooves them to write good business and to closely manage their Workers’ Comp claims, in conjunction with us,” says Pearce.

Chargeback Model Takes Cost Savings to Multimillion Level

Keeping its field offices accountable for Workers’ Comp costs wasn’t always how Kelly did business. And as a result, nearly two decades ago, the company’s loss rate based on payroll was close to 4 percent.

This figure was attributable in no small part to the fact that Kelly had no real mechanism to control its field offices’ appetite for risk—risk, in this case, being defined as the types of conditions its temporary workers would find at the employer’s place of business.

Kelly’s C-suite mandated that this loss rate be brought to heel—and fast.

The solution developed was Kelly’s first Workers’ Comp “chargeback” model. This incentive-based approach allows Kelly’s field operations an opportunity to receive credits back if they make good decisions with respect to their customers’ safety profile and manage the claim process effectively—for example, expeditiously returning injured employees to work, communicating with the third-party-administrator claims rep, conducting timely investigations, etc.

Conversely, if judgment calls by the branch’s management result in more claims, the consequences include the assessment of detailed chargebacks, including penalties.

And the detailed nature of the chargeback is key: Branch offices know precisely which of their injured employees are driving their costs, affecting their branch contributions—and endangering their bonuses.

The savings resulting from this approach have been enormous. Today, on forecasted 2012 wages in the U.S., that 4-percent loss rate from 20 years ago would translate into a Workers’ Comp expense of more than $100 million. Instead, Kelly has been able to hold that rate to around 1 percent for many years since implementing the program.

In fact, Kelly’s fully developed loss-rate estimate for 2008 dropped below the 1 percent mark in its latest forecast—a first in Kelly’s recorded history.

And the value of Kelly’s program isn’t only in the savings. Attaining lower costs in Workers’ Comp—a major expense for any staffing company—allows Kelly to be “highly competitive” in its pricing, Pearce notes, as the firm squares off for business against 100 national competitors and 10,000 smaller ones.

ESIS, a subsidiary of Ace Insurance, has served as Kelly’s third-party administrator in all 50 states since 2007. Kelly has access to ESIS’ online, real-time claim system that allows it to see every medical report, physician bill, attorney bill and other documentation in the claims file.

Given that Kelly receives about 16 claims per day, it’s critical that it be able to pay close, real-time attention to stay on top of them all. And its daily claim-import process provides regular opportunities for early intervention.

Patterns of high frequency at a particular customer site can be detected, and Tilley’s team is able to address these issues immediately versus having to wait as long as 30 days when a month’s worth of activity is posted, as is the case with other claim-management systems.

To address minor injuries such as sprains and strains (which for a time were often referred to off-site care that sometimes proved more expensive and time-consuming than it needed to), Kelly retained Medcor, which provides a 24/7 nurse-triage program for injuries.

Workers with minor injuries are provided immediate, over-the-phone access to medical professionals who can make clinical decisions about when self-administered first aid is an option and when a referral to an outside medical clinic is necessary.

Tilley says that in half of these types of cases, callers will opt to self-treat and go back to work; if specific medical attention is required, the Medcor nurse will use geo-mapping to refer them to an appropriate medical facility.

So in half of these minor-injury cases, not only is a claim prevented for Kelly Services, it also prevents a recordable claim on the OSHA logs of its customers—thereby improving their incidence rates.

For dealing with more serious injuries, Kelly has a group of safety professionals spread across the U.S. who handle training, orientation, inspections and accident investigations.

The company produces a variety of reports the safety team uses to manage loss costs, one of which is a monthly “Top 100” report that lists those clients that have the greatest opportunity for improvement in four key areas: incurred loss rate (as a percent of payroll); frequency rate (per 100 full-time equivalents); the client’s adjusted gross profit; and whether Kelly has overaccrued or underaccrued for expected losses.

An account that fails three of these four metrics is identified as a candidate for an immediate safety intervention.

The report, which also is made available to its operational field offices, can be used as an underwriting tool so that pricing adjustments can be made.

“If we’re having safety challenges with a specific customer, we’re going to engage that customer in a dialogue,” says Pearce, adding that early detection is key in enabling Kelly to better identify and communicate issues to the client and determine the best course of action.

Prescription Pilot Programs Address True Cost of Meds

Kelly continually seeks out pilot programs that might yield additional cost savings, including strategies to control one of the biggest costs of all—drug/pharmacy expenditures.

One current pilot program, addressing one of the hot-button issues in Workers’ Comp right now, is an effort to curb the use of opioids in the treatment of chronic pain for injured employees, including cases in which Class II short-acting narcotics are prescribed.

In those instances, Kelly’s senior claim consultants will work with its TPA’s telephonic and field-case-manager pain specialists to engage the prescribing physician as well as the patient. Prescribing practices are subject to peer-to-peer intervention and investigations by TPA-identified doctors, and claimants need to submit to periodic urine drug testing to ensure they are complying with the narcotic treatment plan prescribed.

Another of Kelly’s successful pilots: a “First Fill” prescription program offered by its TPA that allows injured employees the ability to receive their first 15 days of medication without incurring any out-of-pocket expense. This feature accommodates injured employees who seek immediate medical treatment that results in a prescription being written.

Previously, the employee would initially pay for meds out of pocket since the claim had not yet reached the claims-handling office. Kelly is protected from financial exposure in this program, in that if the claim is ultimately denied by the TPA claims rep, the pharmacy-benefit manager absorbs the cost of the initial fill.

Yet for the millions Kelly Services manages to save each year through its prevention efforts, the shared idea of preventing accidents that lead to Workers’ Comp losses isn’t just a monetary one, says Pearce.

“We’re willing to make the investments because it’s reflective of our corporate culture,” he adds. “We do try to do the right thing, and it’s reflective of a larger mentality at Kelly.”

Treasury & Risk

Treasury & Risk is an online publication and robust website designed to meet the information needs of finance, treasury, and risk management professionals. Our editorial content, delivered through multiple interactive channels, mixes strategic insights from thought leaders with in-depth analysis of best practices, original research projects, and case studies with corporate innovators.